Unreliable supply chain dynamics, turbulent (and expensive) regulatory frameworks, and evolving consumer preferences are among the many challenges cannabis operators must overcome just to stay in business – let alone to thrive and succeed. Mastercard’s recent enforcement action limiting the cannabis industry’s cashless payment options is yet another reminder of the difficulties our industry faces in accessing essential business services. Yet despite these challenges, the winners that are emerging will tell you that herculean efforts alone are not enough to garner success. We’ve learned through our partnerships with thousands of cannabis businesses that one of the most critical factors to predicting success is in how each business sources, engages with, and retains the key services providers they choose to partner with.
Breaking Down the Basics
In order for cannabis businesses to be successful, they need access to the same set of services afforded to any other business/industry. The cannabis industry generally lacks the same market forces that lead to competitive differentiation and benefit businesses in other industries, including factors like pricing, service quality, product mix. In competitive markets where multiple service providers vie for the same set of customers, market forces tend to dictate a higher level of quality, performance, and pricing benefitting end customers. Unfortunately for the cannabis industry, a scarcity of service providers means cannabis businesses do not always enjoy these benefits. Of course, there are outlier categories, but most operators will attest that their limited options ultimately hamper business growth. This sentiment is perhaps most acute in the financial services vertical, where “basic” services such as banking, payments, insurance, and payroll are still relatively difficult to obtain.The underlying issues here are as much about quality as they are about access. That is, many service providers struggle to access quality simply because the hurdle of access is difficult to overcome.
Solving for “Access”
When we set out to build Green Check, we focused 100% of our energy on expanding access to financial and business services. At our core, Green Check is a marketplace that connects cannabis businesses with financial and business service providers. Our cutting-edge technology verifies compliance and automates tasks that were previously very time and labor intensive, thus enabling more service providers to enter this space and serve the cannabis industry. The concept of a marketplace gives us an interesting lens by which to view how we’ve tackled the problem of access.
Marketplaces have been around almost as long as commerce has existed, historically serving as a physical place for people to buy and sell goods. More recently, the internet has supported a massive wave of e-commerce marketplaces (Amazon, Ebay, Alibaba), followed by a new wave of service marketplaces (Uber, Airbnb, HomeAdvisor). A third wave of marketplaces now exist in the form of aggregators such as NerdWallet, RedFin, or Expedia. These aggregation platforms do not deliver the services themselves, but rather rely on a network of providers and the use of data and analytics to connect supply with demand in ways that are mutually beneficial.
What Makes a Marketplace Successful?
Marketplaces tend to be semi-autonomous with built-in growth mechanisms, making them attractive business models for companies looking to draw and retain customers at scale. More broadly, marketplaces offer:
- Availability and Distribution: listing and describing goods/services combined with infrastructure to purchase / deliver those services is the cornerstone of any marketplace, but the most successful ones use data and analytics to produce intelligent matching based on a variety of factors from both buyers and sellers.
- Trust: a marketplace serves as a (relatively) independent 3rd party, in which providers must overcome some barrier to entry. This arbitration creates a forcing function that leads to a higher quality of providers, while allowing room for communication / remediation between supply and demand.
- Network effects: more participants in a marketplace help scale 1 and 2
Just as a financial advisor recommends investments based on one’s life goals and circumstances, an aggregator marketplace makes recommendations based on the factors that drive success for both the buyer and seller. But unlike a financial advisor’s investment recommendations, most marketplaces require a level of understanding from both sides of a transaction. You may not need an in-depth understanding of public markets to grow your retirement fund, but you DO need an in-depth understanding of a provider’s products and services when selecting a new business partner.
At Green Check, our thesis is simple: Cannabis businesses need adequate financial and business services to grow, but struggle to access them. What most may find interesting is that cannabis businesses and service providers want to be able to work together, but many just don’t know how. Among several factors, this is mostly due to the fear, uncertainty, and doubt from both sides stemming from a lack of visibility, (not to be confused with a lack of trust, per se). This lack of visibility then leads to a lack of access, which in turn means a lack of opportunity for both sides to work together to achieve their shared goals.
The Green Check Connect marketplace builds on these themes and focuses on data as the fundamental building block to a successful B2B marketplace. We believe that transparency is the key to trust, and data is the key to transparency. Similarly, shared understanding is the key to success, and data is the key to shared understanding. Therefore, connectivity to data is the key to providing cannabis businesses with the services they need to grow. The more data a marketplace has and can provide, the more value the marketplace can unlock.
Connecting Supply with Demand
While discovery, connectivity, and enablement are important components to a marketplace, they fall flat without a coherent strategy around using data to ensure the connections are meaningful, and therefore lasting. Unfortunately, we’ve learned that a lack of data has led to many leading providers in their respective verticals to avoid the cannabis industry altogether, thereby limiting the pool of adequate service providers that cannabis businesses can work with.
We also know that third party relationships are an important part of any business, however, this is especially applicable in the cannabis industry, where the landscape continues to change on a daily basis. No cannabis operator wants to worry about the quality or sustainability of their critical vendors, and they certainly do not want to feel pressured to “settle” for inferior products and services.
Lastly, we believe that cannabis businesses must focus their limited energy on driving their business goals, and not expend the significant level of effort currently involved in procuring the business and financial services they need to grow.
With this perspective, we set out to build a marketplace that:
- Unlocks access to a wider variety of service providers. This is accomplished by building tools and using data to help providers quantify the opportunity and reduce the perceived risks associated with servicing the cannabis industry.
- Supports business growth by providing cannabis operators with access to a host of vetted, best-in-class third-party products and services.
- Reduces the time, effort, and cost cannabis operators spend on searching for, vetting, and acquiring third-party service providers.
The culmination of these efforts led us to launch Green Check Connect – the cannabis industry’s first B2B marketplace dedicated to using data to provide intelligent matching between operators and service providers, with an emphasis on ease-of-use and simple onboarding. By removing these barriers to entry, we believe we can connect every cannabis business with the financial and business services that they need to grow – advancing our overarching mission of supporting the cannabis industry.